DAI is a decentralized stablecoin that aims to maintain a value of 1 US dollar (USD). It’s part of the MakerDAO ecosystem, which is built on the Ethereum blockchain.
Here’s a quick breakdown:
Stablecoin: DAI is designed to be stable in price, unlike most cryptocurrencies which can be very volatile.
Decentralized: Unlike centralized stablecoins like USDT (Tether) or USDC (Circle), DAI is not controlled by a single company. It’s governed by a decentralized community through MakerDAO.
Collateral-backed: DAI is created when users lock up other cryptocurrencies (like ETH, WBTC, etc.) in a smart contract called a vault. These assets act as collateral.
Soft Peg to USD: While the target is 1 DAI = 1 USD, the price can fluctuate slightly due to market forces, but mechanisms are in place to bring it back to $1.
$Why use DAI?
To avoid crypto volatility while still staying in the crypto ecosystem.
To earn yield in DeFi (decentralized finance) apps.
To make payments or transfers with stable value.